Ohio FY 2016-2017 Budget – Tax Highlights

Recently Governor John Kasich signed the fiscal year 2016-2017 budget bill into law. Below are tax highlights covered in the budget.

Income Tax Cut

As of 2015 a taxpayer may deduct from business income the lesser of 75% of Ohio small business income for small businesses earning under $250,000 or $187,500. For subsequent tax years, the tax is eliminated for businesses earning $250,000 or less. A flat tax rate of 3% is applied to businesses earning more than $250,000. Effective for tax years 2015 and thereafter, individual income tax rates are reduced and will range from 0.495% for individuals earning $5,000 or less to the top rate of 4.997%.

Tangible Personal Property Exemption

The exemption for tangible personal property of a qualified energy project using renewable energy resources is extended from 2016 to 2021 if all necessary conditions are satisfied.

“Substantial Nexus”

The legislation clarifies that substantial nexus is presumed to exist when:

the seller uses an office, distribution facility, warehouse, storage facility or similar place of business within the state whether operated by the seller or any other person;

the seller regularly uses employees, agents, or other persons to engage in a business with the same or a similar industry classification as the seller, selling a similar product or line of products as the seller, or uses trademarks, service marks or trade names in the state that are the same or substantially similar to those used by the seller; or

uses any person other than a common carrier for purposes of receiving or processing orders; uses that person’s employees or facilities in the state to advertise, promote, or facilitate sales by the seller to customers; delivers, installs, assembles, or performs maintenance services for the seller’s customers; or facilitates the seller’s delivery of tangible personal property to customers in the state by allowing the seller’s customers to pick up property sold by the seller at an office, distribution facility, warehouse, storage facility, or similar place of business.

Entering into an agreement with one or more residents of the state where the resident directly or indirectly refers potential customers to the seller, whether by link or website or otherwise, where cumulative gross receipts exceeds $10,000 during the preceding 12 months will also presumably establish substantial nexus.